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Ruble Drops Most in Month to Dollar as Investors Shun Risk

Feb. 23 (Bloomberg) -- The ruble slid the most this month against the dollar as chaos in the Middle East prompted investors to take their money out of markets viewed as posing a higher risk.

Russia’s currency weakened as much as 0.5 percent to 29.3235 per dollar, the largest decline since Jan. 31, and was down 0.4 percent at 29.2747 as of 2:55 p.m. in Moscow.

Unrest has spread to Libya, Bahrain, Iran and Yemen, after protesters brought down the ruling regimes of Egypt and Tunisia amid complaints about corruption and rising prices. Protesters in many of the countries have been fired upon and killed as autocratic leaders strive to hold on to power amid popular revolt. The tension has spurred investors to seek out the relative safety of the dollar, with all but two of the 25 emerging-market currencies tracked by Bloomberg sliding against the greenback today.

The ruble is sliding amid the “risk-off environment,” Dmitry Gourov, an emerging-markets strategist at UniCredit SpA, said by e-mail from London. “It’s a short-term profit-making opportunity.”

The ruble weakened for a fourth day against the euro, sliding 0.2 percent to 39.97 and erasing an earlier advance of as much as 0.6 percent. That left the currency 0.3 percent lower at 34.0843 against the target dollar-euro basket used by the nation’s central bank to temper swings in the ruble. The basket rate is calculated by multiplying the dollar-ruble rate by 0.55, the euro-ruble rate by 0.45, then adding them together.

Middle Eastern tensions pushed crude oil, Russia’s biggest export earner, to a two-year high of $94.49 a barrel today in New York, an advance of as much as 9.6 percent.

Defenders of the Fatherland

The spate of risk aversion eliminates any support the ruble may receive from oil prices, Gourov said in a research note e-mailed earlier today. UniCredit is advising clients to bet on this decline by placing short positions, or bets an asset will drop, on the ruble versus the basket today and on Feb. 24, the note said. Russian markets are closed tomorrow for Defenders of the Fatherland Day.

Ruble-denominated government debt due August 2016 was unchanged, with the yield steady at 7.55 percent. The yield on sovereign dollar bonds maturing in 2020 rose 2 basis points to 5.14 percent. Dollar debt due 2015 also rose, with the yield 1 basis point lower at 3.70 percent.

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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